When Congress or a state legislature passes a minimum wage increase, there is often a period of several months between the passage of the increase and its implementation. During this period, employers know the level of the current binding minimum wage, but they also know the level of the minimum wage at a defined future date. Although this “future wage,” as I call it, is not yet binding, employ...

This paper presents a theoretical analysis of optimal minimum wage policy in a perfectly competitive labor market. Introducing a minimum wage is desirable if the government values redistribution toward low wage workers. This result remains true in the presence of optimal nonlinear taxes and transfers. In that context, a minimum wage effectively rations low skilled labor which is subsidized by t...

The Effect of the Minimum Wage on Prices It is well established in the international literature that minimum wage increases compress the wages distribution. Firms respond to these higher labour costs by reducing employment, reducing profits, or raising prices. While there are hundreds of studies on the employment effect of the minimum wage, there is less than a handful studies on its profit eff...

We exploit the introduction of minimum wages in the agricultural and domestic work sectors of South Africa to study how the structure of low-wage labor markets of a low-income country changes with the changes in policy. Even after the introduction of the minimum wage, we find widespread and persistent non-compliance. Our (lowerbound) estimate of the national level compliance rate in the agricul...

This paper provides a theoretical analysis of optimal minimum wage policy in a perfectly competitive labor market. We show that a binding minimum wage -while leading to unemployment -is nevertheless desirable if the government values redistribution toward low wage workers and if unemployment induced by the minimum wage hits the lowest surplus workers first. This result remains true in the prese...

This paper provides a theoretical analysis of optimal minimum wage policy in a perfectly competitive labor market. We show that a binding minimum wage – while leading to unemployment – is nevertheless desirable if the government values redistribution toward low wage workers and minimum wage induced unemployment hits the lowest surplus workers first. This result remains true in the presence of o...

This paper evaluates the worker-level effects of a historically large and permanent increase in minimum wage Lithuania. Our identification strategy leverages variation workers’ exposure to new wage, exploits fact that there has been no previous years, account for heterogeneous labor market prospects low-wage workers relative high-wage workers. Using detailed administrative records track before ...

The minimum wage has gained momentum among policymakers as a way to alleviate rising wage and income inequality. Much of the debate over this policy centers on whether raising the minimum wage causes job loss, as well as the potential magnitude of those losses. Recent research shows conflicting evidence on both sides of the issue. In general, the evidence suggests that it is appropriate to weig...